MODERN FINANCIAL MACROECONOMICS by pharmphresh31

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									    MODERN
   FINANCIAL
MACROECONOMICS
Panics, Crashes, and Crises


     Todd A. Knoop




            Blackwell
            Publishing
                             Contents




List of Figures                                                           ix
List of Tables                                                             x
List of Case Studies                                                      xi
Preface                                                                  xiii
Introduction                                                               1


PART I     AN INTRODUCTION TO FINANCE AND
           MACROECONOMICS                                                 11

1 The Basics of Financial Markets and Financial Institutions              13
   Introduction                                                           13
   What is Financial Intermediation and Why is It Different from Other
      Economic Transactions?                                              14
   What is Money?                                                         16
   The Importance of Financial Systems in Stimulating Long-Run Growth     17
   The Empirical Evidence on Financial Development
      and Growth                                                          21
   The Four Primary Forms of Financial Intermediation                     25
   Conclusions                                                            33

2 A Brief History of Financial Development                                35
   Introduction                                                          35
   A Brief History of Banking, Financial Markets, and Central Banking    36
   Modern Central Banking                                                40
   A Brief History of International Capital Flows                        42
vi                                    Contents

     Globalization and Financial Development in the 1990s
     Conclusions

PART II MACROECONOMIC THEORY AND THE
        ROLE OF FINANCE

3 Business Cycles and Early Macroeconomic Theories of Finance
     Introduction
     Business Cycle Definitions
     Financial Indicators of Business Cycles
     The Sunspot Theory
     Early Monetary Theories
     The Classical Model
     The Debt-Deflation Theory
     Conclusions

4 Keynesian, Monetarist, and Neoclassical Theories
     Introduction
     Keynes' General Theory
     Keynesian Economics and the IS-LM Model
     The Financial Instability Hypothesis
     The Monetarist Model
     Principles of the Monetarist model
     Neoclassical Theories
     Conclusions

5 New Institutional Theories of Finance: Models of Risk and
  the Costs of Credit Intermediation
     Introduction
     What is Meant by "New Institutional" Theories of Finance?
     The Financial Accelerator Model and the Role of Credit
        in Business Cycles
     The Financial Accelerator and Monetary Policy
     The Empirical Evidence on the Financial
       Accelerator Model
     Conclusions
6 New Institutional Theories of Finance: Models
  of Credit Rationing
     Introduction
     Two Models of Credit Rationing
                                 Contents                                vii

  Equity Rationing                                                      129
  Empirical Evidence on Models of Credit Rationing                      131
  Conclusions                                              •            137

PART III FINANCIAL VOLATILITY AND ECONOMIC
         [INSTABILITY                                                   139

7 The Role of Financial Systems in Monetary and
  Stabilization Policy                                                  141
  Introduction                                                          141
  Why Does Money Matter? Traditional Theories of the Monetary
     Transmission Mechanism                                             142
  Balance Sheet Channels and the Monetary Transmission Mechanism        145
  Empirical Studies of the Balance Sheet Channels of Monetary
     Transmission                                                       147
  Is Monetary Policy Still Powerful? A Look at the Empirical Evidence   148
  Old Debates over the Effectiveness of Stabilization Policy            152
  New Debates over the Effectiveness of Stabilization Policy            154
  Conclusions                                                           161

8 Banking Crises and Asset Bubbles                                      163
  Introduction                                                          163
  The Causes and Prevention of Banking Crises                           165
  Empirical Evidence on Banking Crises                                  169
  The Causes and Prevention of Asset Bubbles                            173
  Empirical Evidence on Asset Bubbles                                   178
  Conclusions                          '                                188


PART IV INTERNATIONAL FINANCE AND
        FINANCIAL CRISES                                                191

9 Capital Flight and the Causes of International Financial Crises       193
  Introduction                                                          193
  The Causes of Capital Flight and Currency Crises                      195
  Contagion                                                             198
  Empirical Evidence on Capital Flows, Currency Crises,
     and Contagion                                                      200
  The Causes and Costs of Twin Crises                                   202
  The Currency and Banking Crises in East Asia                          205
  Conclusions                                                           213
viii                                   Contents

10 International Financial Crises: Policies and Prevention   215
       Introduction                                          215
       The Benefits and Costs of Financial Liberalization    216
       Guidelines for Domestic Financial Regulation          219
       The Pros and Cons of Capital Controls                 222
       International Financial Regulation                    224
       The IMF, Its Policies, and Its Critics                225
       Reforming the IMF                                     233
       Conclusions                                           234


PARTV CONCLUSIONS                                            237
11 What We have Learned, What We Still Need to Learn about
   Financial Macroeconomics                                  239
       A Brief Review                                        239
       What We Have Learned about Financial Macroeconomics   241
       What We Do Not Know                                   247
       Concluding Conclusions                                254

Bibliography                                                 255
Index                                                        265

								
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